SHANGHAI stocks retreated today as concern about the country's economy overshadowed last night's interest rate cuts.

The Shanghai Composite Index fell 0.51 percent, or 11.68 points to 2,281.45 points. Turnover was 63.8 billion yuan (US$10.1 billon) at the trading close. The index lost 3.88 percent this week.

The People's Bank of China announced late yesterday that it was cutting the benchmark interest rates by 25 basis points, with the one-year lending rate falling from 6.56 percent to 6.31 percent. The deposit rate dropped from 3.5 percent to 3.25 percent. Both rates take effect today.

The cuts came before economic data for May is released tomorrow.

"The timing may indicate the data for May will be disappointing," said Yin Zhongli, a researcher with the Financial Research Institute of the Chinese Academy of Social Sciences.

The central bank also offered lenders the flexibility to set the deposit rate to a maximum of 110 percent of the benchmark rate. The lending rate can be lowered to a minimum of 80 percent of the benchmark rate.

Lenders slumped as rate flexibility may increase competition among banks. Industrial and Commercial Bank of China Ltd, the nation's largest lender, lost 0.7 percent to 4.16 yuan. China Construction Bank Corporation edged down 0.9 percent to 4.45 yuan. Bank of Communications Co dropped 1.3 percent to 4.50 yuan.

Most brokerages gained. Haitong Securities Co gained 0.4 percent to 10.18 yuan. Founder Securities Co added 1.2 percent to 5.25 yuan. Citic Securities, the nation's biggest listed brokerage, shed 0.1 percent to 13.14 yuan.

Property developers were mixed. China Vanke, the nation's biggest developer, shed 0.4 percent to 8.92 yuan. Poly Real Estate, the country's second largest developer, lost 0.1 percent to 13.63 yuan.

Shanghai Xinmei Real Estate Co surged 8 percent to 7.20 yuan.

Source:shanghaidaily